I am informed by the Revenue Commissioners that persons employed in the construction industry are classified for tax purposes as employees or as sub-contractors.
Revenue cannot dictate the terms under which workers are engaged in any industry. The increasing drift towards self-employment in the industry mirrors the world-wide trend towards contracting out and reflects the increased flexibility of work practices.
Sub-contracting is an integral part of the construction industry. Payments to sub-contractors come within the relevant contracts tax —RCT — system commonly referred to as the C2 or C45 system. Under this system, where a principal contractor makes a payment to an unregistered contractor, he or she is required to deduct relevant contracts tax from those payments at the rate of 35 per cent.
Revenue has issued guidelines to the industry setting out the criteria under which a person may be regarded as an employee as distinct from a sub-contractor. Principal contractors and sub-contractors creating self-employment contractual arrangements must sign a declaration to the effect that these guidelines have been considered by them and they are both satisfied that the contract created is a contract of self-employment. However, if it emerges as a result of an investigation that an employment, rather than a sub-contract, exists and PAYE-PRSI and levies are not being deducted, the principal becomes liable for the PAYE-PRSI and levies.